A tariff is a form of tax. And like any other tax, tariffs impose economic costs that reduce our standard of living. But some talk of tariffs as though these taxes can magically raise revenue for the government while making trade fairer, citizens more prosperous, and business endeavors more productive. Do tariffs defy the laws of supply and demand and lift our standard of living? This essay sets out to answer that question, exploring how the United States has used tariffs, reviewing theoretical and empirical research on who pays and who benefits under tariffs, and demonstrating what else happens when tariffs are imposed. It is dubious to claim that tariffs can be imposed with no economic trade- offs, and economists generally consider them to be poor tools for achieving various policy objectives. Tariffs repeatedly fail to achieve goals like increasing the number of things we produce, creating more jobs, or fostering healthy and innovative companies. Instead, tariffs tend to raise prices, reduce economic activity and efficiency, and invite foreign retaliation and domestic political dysfunction.
Authors
- Published in
- United States of America
